02 March 2016
Growth in E-commerce
Retail sales in China are now growing at almost twice real GDP. Nowhere is this more apparent than in the contrast between cranes and delivery tricycles. Several years ago China’s skyline was dotted with cranes used in infrastructure and construction projects. Today, these old growth drivers are far less common. In their place are ubiquitous red delivery tricycles that buzz about the streets bearing the names of E-commerce platforms such as Tmall.com and Jd.com. According to one major company, E-commerce in China grew by over 300% last year, is expected to grow by over 100% again this year and reach 40% of total retail sales by 2019.
E-commerce suits China’s unique consumer base. Just like much of the population has leapfrogged traditional technology such as fixed landlines and straight to smartphones, many consumers have become early adopters of online shopping. With over 150 Chinese cities that are bigger than Berlin and good infrastructure —the economies of scale for E-commerce businesses are potentially easy to achieve.
Pomegranates from Tunisia, keeping it real
Food, air and water quality are real issues for everyday Chinese consumers. Finding clean water supplies in China is difficult and per capital consumption of bottled water has increased 13-fold since 1998. In Australia, Chinese demand for premium food and health products is well known. 98% of Australian crayfish is exported to Asia and demand for Australian products such as infant formula and vitamins have been well publicised.
However, access to authentic premium products is a key challenge for Chinese consumers. During the trip, we were briefed on whole factories producing fake bottles of French wine and eggs. It is now estimated that one in every three bottles of wine consumed in China is fake. Some niche online companies such as Chunbo.com actually produce test reports for wary consumers to confirm the authenticity and country of origin of the food products they sell. In central Beijing, fresh food from around the world is available for delivery within 2-3 hours of ordering. Popular items available include cherries from Chile, Australian beef, and pomegranates from Tunisia.
The opportunity: Reaching 600 million Chinese consumers
E-commerce brings China’s ~600 million online consumers within reach of even the smallest international producers offering market access, lower costs and minimal risk compared to traditional exporting. Australian companies have several key advantages in this market including a strong reputation for natural ingredients, safety, quality and some of the best market access in the world through ChAFTA.
Opportunities for Australian companies
These advantages, combined with a strong understanding of Chinese consumers, have seen Australian companies such as Blackmores have considerable success in this market. Blackmores is a good example of an Australian company investing for the next decade of sustainable growth in China, not only in E-commerce distribution but also in traditional retail stores, brand awareness and consumer education.